Madras High Court
M/S.Sesa Sterlite Limited vs Dreymoor Fertilizers Overseas Pvt. Ltd on 4 December, 2014
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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on : 17.09.2018
Delivered on : 10.01.2019
CORAM
THE HONOURABLE MRS. JUSTICE R.THARANI
C.R.P.(PD)(MD)No.208 of 2015
and
M.P.(MD)No.1 of 2015
M/s.Sesa Sterlite Limited
Formerly known as Sterlite Industries
(India) Limited registered office SIPCOT
Industrial Complex,
Madurai Bye-pass Road
Tuticorin - 2. ... Petitioner/
Vs.
Dreymoor Fertilizers Overseas Pvt. Ltd.,
10,Anson Road, 109-06, International Plaza,
Singapore 903 Sandeep Relan. ... Respondent
Prayer : This revision petition is filed under Article 227 of Constitution of
India, to revise the fair and decreetal order, dated 04.12.2014 made in
E.A.No.75 of 2012 in E.P.No.81 of 2012 on file of the Principal District
Judge, Tuticorin.
For Petitioner : Mr.Rajendra Gopalan
For Respondent : Mr.T.Ram Kumar
for M/s.Ram & Rajan Associates
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ORDER
This civil revision petition has been filed by the petitioner against the order, dated 04.12.2014, made in E.A.No.75 of 2012 in E.P.No.81 of 2012 on file of the Principal District Judge, Thoothukudi.
2. The revision petitioner herein is the petitioner in E.A.No.75 of 2012 and respondent in E.P.No.81 of 2012. The respondent herein is the respondent in E.A.No.75 of 2012 and petitioner in E.P.No.81 of 2012.
3.The brief facts of the case are as follows;
There was a Contract between the petitioner and the respondent. In pursuant to the Contract, dated 24.12.2009, the petitioner had to supply 10,000 M.T. of Phosphoric Acid Solution to the respondent in January 2010, on board at Tuticorin. In terms of Clause 3, both parties accepted the “Laycan” period as 1st - 5th February, 2010. However, the delivery of cargo by the petitioner was delayed from January - 2010 to February – 2010 to accommodate maintenance shut down in the petitioner's factory. This was referred in the E-mail, dated 13.01.2010 (Ex.P.5) and a time extension was sought for stating that the petitioner breached the contract, the respondent appointed one Mr.Roger Rookes as their arbitrator and intimated the same to the petitioner by email dated 4th February, 2010. The petitioner did not nominate their http://www.judis.nic.in 3 arbitrator and did not file appeal against the appointment of arbitrator. While so, the arbitrator passed the award dated 22.03.2011.
(b) Thereafter, the respondent herein has filed E.P.No.81 of 2012 for enforcing the award dated 22.03.2011 passed by the learned Arbitrator - Mr.Roger Rookes directing the petitioner herein to pay $1,026,000/-USD (US Dollars One Million and Twenty Six Thousand only), with interest at 3.75% per annum from 05.02.2010 till the date of realization, together with Arbitrator's cost of GB Pound 1750, (GB Pounds One Thousand Seven Hundred and Fifty only) and compound interest with quarterly rests at 3.75% per annum from 22.03.2011 till the date of payment and the Arbitrator's cost of GB Pound 1600 (GB Pounds One Thousand Six Hundred Only) and compound interest with quarterly rests at 5% per annum from 05.02.2010 till the date of payment.
(c) During the pendency of the said E.P. application, the petitioner herein has filed an application in E.A.No.75 of 2012 under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 objecting to the enforcement of the foreign Arbitral Award inter alia on the grounds that the Award was unenforceable on account of the award being tainted by 'fraud' and it is contrary to the public policy of India, since the award was based on an alleged forged document filed by the respondent viz., Addendum 1, dated 11.01.2010.
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(d) While so, the respondent has filed E.A.No.109 of 2012 for a direction to the petitioner to furnish security and E.A.No.110 of 2012 questioning maintainability of E.A.No.75 of 2012. But, the Court below, by order dated 13.12.2012, has dismissed both E.A.No.109 and 110 of 2012. Aggrieved by that order, the respondent herein has filed revision petitions in C.R.P.(MD)Nos.763 and 764 of 2013 before this Court. This Court, by order dated 21.04.2014, dismissed both the revision petitions, however, directed the Court below to dispose of E.A.No.75 of 2012 within a period of three months. Aggrieved by that order, the petitioner has filed an appeal before the Hon'ble Supreme Court in Civil Appeals in C.A.Nos.7781 and 7782 of 2014 (Arising out of S.L.P.Nos.20478 and 20479 of 2014). Both the Civil Appeals were disposed of by the Supreme Court recording the statements of the respondent that they will establish their objections to the enforcement of a foreign award by filing affidavit and documents and they will not insist for oral evidence. Thereafter, after hearing both sides, the Court below has dismissed E.A.No.75 of 2012 holding that the award is enforceable. Challenging the said fair and decreetal order of the Principal District Judge, Thoothukudi, dated 04.12.2014, passed in E.A.No.75 of 2012 in E.P.No.81 of 2012. the petitioner has filed this revision petition.
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4.On the side of the petitioner, it is stated that on 24.12.2009, the parties enter into a Contract for the sale of 10,000 metric tonnes of phosphoric acid solution. The agreement contained arbitration clauses. In Clause 16, the shipment period was agreed to be January – 2010, but no specific dates were provided. In Clause 19(i) it is specifically stated that no part of the agreement can be amended unless it is in writing and is signed by both parties. The agreement also contained a Clause in Clause 17 making the laws of United Kingdom as the governing law of the Contract. As per Clause 18, the Courts in London have exclusive jurisdiction.
5.On the side of the petitioner, it is stated that on 13.01.2010, it was agreed between the parties that the laycan for the vessel nominated by the respondent must be by 1st to 5th February-2010. The vessel Gem of Dahej had been nominated. The respondent sent an amended addendum No.1 to the contract, dated 11.01.2010, requesting the last day of shipment to be on 10.02.2010. Thereafter, the petitioner sent an email dated 02.01.2010 to the respondent refusing the proposal and informed that they divert the Cargo to some other parties. On 02.02.2010, the respondent issued a legal notice terminating the Contract and initiated arbitration proceedings. On 03.02.2010, the petitioner informed the respondent that if a substitute vessel was found within the same Laycan period of 01-05th February, the petitioner would http://www.judis.nic.in 6 be able to supply the product. But, the respondent has replied that as the contract had already been terminated, sending substitute vessel does not arise. According to the petitioner, the contract was prematurely terminated and the respondent obtained the award by filing a forged document viz., Addendum 1 and that the enforcement of such award will be against the public policy of India.
6.On the side of the petitioner, it is stated that the award is not enforceable in India, as the composition of the arbitral authority was not in accordance with the agreement between the parties. The addendum 1 (Ex.P4) was signed only by the respondent and not by the petitioner. In the addendum 1, dated 11.01.2010, signed by the petitioner which was marked as Ex.P2, the last day of shipment is stated to be 08.02.2010. The respondent has fraudulently changed the last date of shipment to be 10.02.2010, instead of 08.02.2010. As per the Contract none of the addendums would have the effect of amending the contract itself, since it is not signed by both the parties as contemplated in the contract. The arbitral Tribunal failed to appreciate that the quantity to be loaded was about 10,000 MT of phosphoric acid solution. The Tribunal failed to appreciate that the respondent could have rejected the nomination of the ship since the nominated ship was not ready for loading and loading could not have been completed within the laycan period. The Tribunal failed to appreciate that the time for taking delivery (not less than the http://www.judis.nic.in 7 time of shipment) is of the essence of FOB contract. Thus, the award is patently illegal and the award is to be declared as unenforceable and inexecutable in India.
7.On the side of the petitioner, it is stated that on 04.02.2010 Mr.Roger Rookes was appointed as an arbitrator. On 15.03.2010 the petitioner objected to the commencement of arbitration proceedings, since no steps were taken first to discuss and to amicably settling the matter in dispute and the petitioner reserved its right to object to the same. Thereafter, final award was passed on 23.03.2011, which does not constitute a decree of the Court. In any event, the award dated 22.03.2011 being a foreign award, is governed by the provisions of Part-II of the Act, particularly Section 49 of the Act, in terms of which the award is deemed to be a decree of Court only when the Executing Court is satisfied that the foreign award is enforceable.
8.On the side of the petitioner, it is stated that the respondent has placed a forged document viz., a document purported to be Addendum No.1 dated 11.01.2010 stating the last date of shipment to be 10th February, 2010 instead of the mutually agreed date that is 8th February, 2010 before the arbitrator and that the respondent is attempting to justify that it sent an amended addendum to the petitioner in order to cover up the fraud committed by it before the http://www.judis.nic.in 8 arbitrator and that despite having the opportunity of going through the addendum No.1, dated 11.01.2010 and the petitioner's submissions dated 15.03.2010 and 27.08.2010 expressly stating that the last date of shipment was agreed to be 08.02.2010, the sole arbitrator unjustifiably rejected the contention of the petitioner. It is further stated that it is a case of breach committed by the respondent and that the sole arbitrator acted in a biased manner and usurped illegal jurisdiction and that the appeal remedy in England will be wholly contrary to the Public Policy of India.
9.On the side of the petitioner, it is stated that a foreign judgment is impeachable for fraud in the sense that upon proof of fraud it cannot be enforced. A judgment of the Hon'ble Supreme Court reported in AIR 1974 SC 1764 (Sankaran Govindan Vs. Lakshmi Bharathy) is cited.
10.On the side of the petitioner, it is stated that the arbitral award of damages to the respondent is contrary to the settled Principles of UK Laws. Though the Executing Court cannot go into the merits of the case and review all the evidence in the execution, it has to necessarily test the award on the touchstone of public policy of India. Public Policy as used in Section 48(2) (b) has been interpreted by the Supreme Court to mean, (a) fundamental policy of Indian Law, (2) Interests of India, http://www.judis.nic.in 9 and (c) justice and morality. It is stated that one of the fundamental principles of equity is that no man can take advantage of his own mistakes. A judgment of the Hon'ble Supreme Court reported in (1996) 6 SCC 342 (Ashok Kapil V. Sana Ullah) is cited.
11.On the side of the respondent, it is stated that both India and U.K. are the parties to UNCITRAL and therefore, an award passed in United Kingdom is an enforceable award in India and an arbitral award passed in India is enforceable as a foreign award in U.K. It is stated that in pursuant to the Contract, dated 24.12.2009, the petitioner / debtor agreed to sell to the award holder 10,000 Metric Tons Phosphonic Acid Solution for shipment in January 2010, FOB at Tuticorin. But, the exact quantity for shipment and the Laycan was not mutually agreed at that time/The petitioner fixed a vessel for loading in January, 2010 and then intimated the respondent by way of SMS that the shipment would be delayed due to maintenance shutdown of their factory. The respondent sent a email dated 13.01.2010 placing a request to the petitioner on record and suggested February – 1st to 5th as the laycan period. This was accepted by the petitioner and based on the laycan of 1st to 5th February, 2010, the petitioner sent Addendum No.1 signed by them showing the last date of shipment as 08.01.2010.
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12.On the side of the respondent, it is stated that since the respondent's vessel was held up at Kandla Port, they requested the petitioner for a change in the laycan and sent an amended Addendum No.1, signed by them with last day of shipment as 10.02.2010 and that this was not accepted by the petitioner and by E-mail, dated 02.02.2010, the petitioner informed the respondent that they have diverted the cargo to some other parties and would not be able to supply the respondent and thus, the petitioner committed breach of contract and that the petitioner did not reject the nomination of the vessel but categorically stated that it was unable to supply the respondent since the cargo has been diverted to some other party which is a clear cut breach of contract and that to cover up the lapses, the petitioner by way of E-mail, dated 03.02.2010 Cargo, if a substitute vessel was found within the same Laycan period 1st - 5th February-2010 and on 19.03.2010 the petitioner offered to supply the cargo but at a much higher rate and that was not acceptable by the respondent.
13.On the side of the respondent, it is also stated that as the contract provides for resolution of all disputes through arbitration, the respondent referred the dispute to an arbitrator by name Roger Rookes. The petitioner failed to nominate an arbitrator. As per Section 17(2) of the United Kingdom Arbitration Act, 1996, if a party in default does not within seven days clear of the notice given, make the required http://www.judis.nic.in 11 appointment and notify the other party, the other party may appoint its arbitrator as sole arbitrator and accordingly Mr.Roger Rookes was appointed as the sole arbitrator and such appointment was not challenged by the petitioner. After hearing both sides, the sole arbitrator passed a partial award on 17.09.2010.
14.On the side of the respondent, it is stated that as per Section 17(1) and (2) of the U.K. Arbitration Act, 1996, the respondent appointed it's arbitrator as the sole arbitrator. Section 16 (1) of the Indian Arbitration and Conciliation Act, 1996, provides that the Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreements. In support of his contention, he relied upon a decision of the Orissa High Court reported in AIR 2004 Ori. 153 (State of Orissa Vs. Sundernath Kanungo).
15.On the side of the respondent, it is further stated that the petitioner participated in the subsequent arbitration proceedings and a final award was passed on 22.03.2011 holding that the judgement debtor committed breach of contract and the respondent is entitled to recover damages for breach of Contract. The above award was challenged by the petitioner before the High Court of Justice, Queens Bench Division, Commercial Court, U.K. http://www.judis.nic.in However, the leave to appeal 12 against the award holding that there is no error of law revealed in the award. The above award is similar to Section 34 of the Indian Arbitration and Conciliation Act, 1996. Thus, the petitioner has exhausted its appellate remedies before the U.K. High Court and now the award has become final and binding on the petitioner.
16.On the side of the respondent, it is further stated that Section 48 of the Arbitration and Conciliation Act is not applicable to the instant case, since the arbitration was based on a valid agreement and that the petitioner participated in the arbitration proceedings and exercised its right of appeal and now the petitioner is deliberately evading payment that was due to the respondent.
17.On the side of the respondent, it is stated that Section 48 of the Arbitration and Conciliation Act, 1996 does not give an opportunity to have a second look at a foreign award, that too at the award enforcement stage. The scope of enquiry under Section 48 does not permit review of the foreign awards on merits. Procedural defects, like taking into consideration inadmissible evidence or ignoring/rejecting the evidence which may be of binding nature in the course of foreign arbitration, do not lead necessarily to excuse an award from enforcement on the grounds of public policy. Even if it would be assumed that the Board of Appeal erred in relying upon the report obtained by the buyers http://www.judis.nic.in 13 from Crepin which was inconsistent with the terms on which the parties had contracted in the contract dated 12.05.1994 and wrongly rejected the report of the contractual agency SGS India, such error would not bar the enforceability of the appeal award passed by the Board of Appeal. A judgment of the Hon'ble Supreme Court reported in (2014) 2 SCC 433 (Sri Lal Mahal Limited Vs. Progetto Grano Spa) is cited.
18.On the side of the respondent, it is further stated that based on the facts of the case, it would not be permissible under Section 48 of the Act to refuse enforcement of the award since it would go to the merits of the case and that will be opposed to the decision of the Hon'ble Supreme Court reported in (2001) 7 SCC 728 (Smita Conductors Ltd. Vs. Euro Alloys Ltd) and a judgment of the Hon'ble Supreme Court reported in AIR 1970 SC 833 (Satish Kumar & others Vs. Surinder Kumar & Others) are cited.
19.On the side of the respondent, it is stated that the subject matter of the dispute was only a breach of Contract, which is clearly capable of settlement by way of arbitration and that on the failure of the petitioner to respond to his call for amicable settlement of the claim, the respondent has commenced arbitration proceedings and that in the addendum the petitioner has expressly repudiated the contract on 02.02.2010 and now denies the addendum as a fabricated one and that http://www.judis.nic.in 14 in any International transaction of this nature, a Contract of addendum is signed and send by one party to the other for signature and the said method was adopted in this case for acceptance and that there is no fraud or forgery of document involved.
20.On the side of the respondent, it is stated that in a proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the Court in which the award is sought to be enforced is limited to the grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. A judgment of the Hon'ble Supreme Court reported in AIR 1994 SC 870 (Renusagar Power Company Ltd., Vs. General Electric Company) is cited.
21.On the side of the respondent, it is stated that the award passed by the arbitrator is not based on the addendums, but based on the premature repudiation of the contract by the petitioner on 02.02.2010 itself. The arbitrator held that the Laycan would only mean the date by which the buyer would have to place the vessel for loading. Since the petitioner repudiated the contract on 02.02.2010, the arbitrator held that the petitioner committed breach. The decision of the arbitrator is on merit and it is not to be reopened at this stage. The award is not against the Public Policy of India. Therefore, the petitioner http://www.judis.nic.in 15 is liable to pay compensation.
22.A perusal of the records reveals that there was a contract for supply of phosphoric acid solution in which the petitioner has agreed to supply the acid and the 'laycan' was fixed subsequently. It is seen that delivery of cargo by the petitioner was delayed from January-2010 to February-2010 due to maintenance shutdown of the petitioner's factory and this was referred to in the E-mail dated 13.01.2010 (Ex.P.5). Subsequently, they accepted Laycan of 1st to 5th February-2010. “Laycan” is a combination of the words “Laytime” and “Cancellation”. Laytime in the case of an FOB contract is the period within which the buyer is required to place a ship for loading by the seller. A seller can refuse to load if the vessel arrives before the commencement of laytime. If the buyer does not make available the vessel by the end of laytime, seller can cancel the contract.
23.It is seen from Ex.P.7 - E-mail sent on 1 st February-2010, the respondent requested the change of Laycan to 10 to 12th February-2010 due to delay in arrival of vessel at Tuticorin Port. Although the laycan would end only on 05.02.2010, presuming that the respondent will default in placing the vessel for loading before the end of Laycan, an E-mail (Ex.P8) was sent by the petitioner on 02.02.2010, stating that in view of the vessel allegedly surpassing the laycan, they http://www.judis.nic.in 16 were forced to divert the cargo elsewhere and so they will not be in a position to supply to the respondent. Since the petitioner repudiated to supply cargo, on the same day ie. on 02.02.2010, the respondent sent a reply stating that by way of refusing to make supply, the petitioner has committed a breach of contract. The petitioner sent another E-mail on 03.02.2010 calling upon the respondent to place an alternate vessel within the laycan period of 1st to 5th February, 2010 for loading cargo. But, the respondent rejected that offer, since the petitioner's repudiatory breach of contract has already been accepted by them.
24.It is also seen that the respondent by E-mail dated 04.02.2010 has appointed Mr.Roger Rookes as an arbitrator and called upon the petitioner to nominate their arbitrator as per clause 16 of the contract. Since the petitioner has not taken any steps to set aside the appointment of the arbitrator or to nominate an arbitrator, as per section 17(1)and (2) of the United Kingdom Arbitration Act, 1996, the respondent appointed it's arbitrator as the sole arbitrator. After hearing both sides, the arbitrator had passed the award. As against that award, the petitioner has filed an appeal before the Hon'ble High Court of Justice, Queens Bench Division, Commercial Court, United Kingdom, under Section 69 of the United Kingdom Arbitration Act, which correspondents to Section 34 of the Indian Act. After the full argument by the learned counsel on both sides, the award dated 22.03.2011 was http://www.judis.nic.in 17 approved and consequently, leave to appeal against the award was refused by the Queens Bench.
25.Admittedly, India and United Kingdom are signatories to the United Nations Commission on International Trade Law (UNCITRAL) which is model law in the international commercial arbitration and hence, the arbitral awards passed in one country is enforceable in the other. It is settled law of India that a foreign award is enforceable in India. This Court in C.R.P.(MD).Nos.763 and 764 of 2013, dated 21.04.2014 has also held that a foreign award is enforceable. As against that order, the petitioner had approached the Hon'ble Supreme Court and the Hon'ble Supreme Court has confirmed the said finding after giving limited permission to the petitioner to produce document before the Court below.
26.According to the petitioner, the award is against the public policy of India. A question of public policy would arise, if there was complete restrictions on the implementation of the terms of the contract. There was no such restrictions imposed. Therefore, the question of public policy of India does not arise for consideration in this application.
27.Another point raised by the petitioner is that the award was obtained by filing a forged and fraudulent document – Addendum 1 http://www.judis.nic.in 18 (Ex.A2) showing the last date of shipment as 10 th February, which has not been signed by the petitioner. It is seen from the records that the petitioner had participated in the arbitration proceedings and he had full access to all the documents filed and was aware of the Addendum 1 (Ex.A2) filed by the respondent. No new facts were been introduced by the respondent while passing the award. As stated above, the said addendum was not the only basis for the award of the arbitrator. It is seen that the award was based on repudiation of the contract by the petitioner on 02.02.2010, though the laycan would end only on 05.02.2010.
28.The jurisdiction of the arbitrator was also questioned by the petitioner. It is seen that as per Section 31 of the United Kingdom Arbitration Act, 1996, the Arbitrator has powers to rule on his own jurisdiction. The above Section 31 is similar to Section 16 of the Indian Arbitration and Conciliation Act, 1996. The arbitrator has passed an partial award on 17.09.2010 holding that the sole arbitrator has jurisdiction to determine the substantive issues. But, that order was not challenged by the petitioner under Section 32 of the U.K. Arbitration Act, Therefore, the above contention of the petitioner is not acceptable.
29.It is also seen that the petitioner has questioned the award under Section 48 (2) (b) of the Act. The scope of enquiry under Section http://www.judis.nic.in 19 48 does not permit review of a foreign awards on merits. While considering the enforceability of a foreign award, the Court does not exercise appellate jurisdiction over a foreign award. In other words, Section 48 of the Act does not give an opportunity to have a second look at a foreign award. As stated above, since the petitioner has already challenged the award and the same was rejected by the Queens Bench, the award has become final and the same is binding on the petitioner.
30.The petitioner has not raised any new points for consideration and the petitioner has only reiterated the grounds raised before the Court below in this civil revision petition. Having participated in the arbitration proceedings and having exhausting the appeal remedy, now the petitioner cannot question the award. The Court below has rightly rejected all the grounds raised by the petitioner after detailed discussions. This Court does not find any reason to interfere with the order passed by the Court below. There is no merit in this civil revision petition.
31.As per Section 50 of the Arbitration and Conciliation Act, 1996, no appeal lies against an order rejecting an application under Section 48(3) for setting aside a foreign award. As rightly stated by the respondent, the petitioner has chosen to file this civil revision petition under Article 227 of the Constitution of India, which is basically a http://www.judis.nic.in 20 supervisory jurisdiction and which cannot be converted into an appeal against the order passed under Section 48(3) of the Act. Thus, Viewing from any angle, this civil revision petition is liable to be dismissed.
32.In view of the above, the Civil Revision Petition is dismissed. No costs. Consequently, connected Miscellaneous Petition is also dismissed.
10.01.2019
Index : Yes/No
Internet : Yes/No
Ls
To
1.The Principal District Judge,
Tuticorin.
2.The Section Officer,
VR Section,
Madurai Bench of Madras High Court,
Madurai.
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R.THARANI, J.
Ls
Pre-delivery order
made in
C.R.P.(MD)No.208 of 2015
10.01.2019
http://www.judis.nic.in